The Federal Budget 2025–26, handed down on 25 March 2025, contains several key updates that will affect individual taxpayers, small business owners, and investors alike. While this year’s budget focuses heavily on cost-of-living relief and energy efficiency, there are some important tax changes and omissions you should be aware of.
Here’s a quick breakdown of what this year’s budget means for you and your business from a tax perspective.
Stage 3 Tax Cuts Locked In
The previously legislated Stage 3 tax cuts will proceed from 1 July 2024. These changes benefit a broad range of individual taxpayers, including small business owners who pay themselves through wages or drawings.
Key changes include:
• The 32.5% tax rate drops to 30% for income between $45,001 and $135,000.
• The top threshold for the 37% tax bracket increases from $120,000 to $135,000.
• Higher earners (over $135,000) will still be subject to the 37% and 45% rates.
What this means for you: A modest tax cut for most working Australians and sole traders, potentially increasing disposable income or reinvestment into the business.
No Extension to the $20,000 Instant Asset Write-Off
A major disappointment for many small businesses—the popular $20,000 instant asset write-off will not be extended beyond 30 June 2025.
From 1 July 2025, the asset write-off threshold reverts to just $1,000.
Implication: If your business is planning to purchase equipment, tools, or vehicles, it may be smart to act before 30 June 2025 to take advantage of the higher threshold.
Tax Administration & Compliance
The ATO will receive continued funding to focus on:
• Tax debt collection
• Shadow economy compliance (i.e., cash-in-hand and undeclared income)
• GST integrity and unpaid superannuation compliance
This means increased scrutiny of small businesses, contractors, and gig economy participants. Now is a good time to ensure your records are up to date and your reporting is accurate.
Small Business Tax Offset
There were no changes announced to the Small Business Income Tax Offset, which remains at up to 16% of tax payable on business income, capped at $1,000 per year.
Still, it’s a useful reminder for sole traders and partnerships to claim it if eligible.
Digital Tax Reporting Push
The government reaffirmed its support for eInvoicing and greater integration of digital tax reporting systems. While not mandatory for all small businesses yet, it’s a clear sign that manual reporting will continue to phase out.
Advice: Start thinking about upgrading your systems or cloud accounting software if you’re still running paper-based or manual processes.
Final Thoughts
While the 2025 budget was relatively light on major new tax reforms, it reinforces a few important messages for small businesses:
• Plan capital purchases before the $20,000 write-off ends.
• Stay compliant—ATO audits are on the rise.
• Prepare for digital transformation in tax reporting.
If you’re unsure how the new measures might affect your business, or want to make the most of available tax opportunities before EOFY, our team is here to help. Get in touch to book a tax planning session before 30 June!